Exam 24: Multistate Corporate Taxation

Sylvia spends time working at the offices of her employer as a consultant to clients who are located in three different U.S. states. Sylvia's compensation is assigned to the payroll factor(s) of which state(s)? Apply the general UDITPA rules.

describe(s) the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an out-of-state entity's income.

The typical state sales/use tax falls on sales of both real and personal property.

Compost Corporation has finished its computation of Federal taxable income. In State Q, the derivation of state corporate taxable income starts with the Federal amount and makes a number of modifications. List at least five such modifications that Compost is likely to encounter. In this regard, follow the general UDITPA rules, and list both addition and subtraction modifications.

When the taxpayer operates in one or more unitary states:

Garcia Corporation is subject to income tax in States G, H, and I. Garcia's compensation expense includes the following: State G State H State I Total Salaries and wages for nonofficers \ 600,000 \ 500,000 \ 500,000 \ 1,600,000 Officers' salaries -0- -0- 800,000 800,000 Officers' salaries are included in the payroll factor for States G and H but not for I. Compute Garcia's payroll factors for G, H, and I.

Politicians frequently use tax credits and exemptions to create economic development incentives.

A state sales/use tax is designed to be collected by the (seller/purchaser) of the product and then remitted to the state.

When the taxpayer has exposure to a capital stock tax:

Almost all of the states assess some form of consumer-level sales/use tax.

In some states, an S corporation must withhold Federal income tax for the proportionate flow-through income of its shareholders who (are/are not) state residents.

General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its State A headquarters to the State B office of the Federal Bureau of Investigation. In which state(s) will the sale be included in the sales factor numerator?

Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's garage sale.

The sales/use tax that is employed by most U.S. states does not fall on all retail transactions. Identify at least five sales/use tax exemptions that states often allow that eliminate certain transactions from the tax base.

Match each of the following items with the appropriate description in determining whether sales/use tax typically must be collected. -A new auto purchased in Europe and shipped by the owner to her home state in the United States.

The property factor includes business assets that the taxpayer owns and those merely used under a lease agreement.

When included in the property factor, leased property usually is valued at times its annual rental even though the taxpayer does not own the asset.

A(n) business operates in concert with its affiliated companies. As a result, the affiliates' data are included in the parent's apportionment computations.

In conducting multistate tax planning, the taxpayer should:

Typical indicators of income tax nexus include the presence of customers in the state.